Barstool Sportsbook Coming To Five More States By NFL Season, Starting With Indiana This Month

Penn National CEO says company had a strong Illinois start with strategy to gain young, loyal sports bettors

The next state to see the Barstool Sportsbook app will be Indiana this month, coming after what Penn National Gaming CEO Jay Snowden described Thursday as a highly successful March 11 launch in Illinois.

Snowden summarized the company’s recent performance and upcoming plans in a quarterly update for the financial community. He spoke of the resurgence of activity in Penn National’s land-based casinos nationally to levels near or beyond pre-pandemic levels in recent months, while also going into some detail about the online Barstool-branded sportsbook and casino.

The sportsbook app is live in Pennsylvania, Michigan, and Illinois, with Indiana to be added before the Indy 500 runs on May 30. Four more states — not identified — are to launch by the start of the NFL season, and 10 or more total will be in operation by year’s end, Snowden said.

He said Illinois’ results in the first 30 days “exceeded our expectations, with better first-time deposit conversions relative to what we had generated in Pennsylvania or Michigan. During this period, we registered over 54,700 new customers and generated total handle and gaming revenue of $67.7 million and $6.5 million, respectively. We also experienced high engagement, with 54% of our Illinois customers wagering on Barstool-exclusive bets.”

Penn National came late into the Illinois market, and no figures have been released yet on how it compared to other sportsbook operators there for the full month of April. Its Barstool app was also affected by the return April 4 of an in-person registration requirement in Illinois for those wanting to establish online accounts, but Snowden said that’s one area where the partnership with the social media platforms of Barstool Sports and its personalities proved valuable.

“The power of the Barstool social media reach was on full display,” he said.

The involvement of Dave Portnoy and others highlighting the pending registration requirement helped drive 20,000 new customers to the platform in the 36 hours before the requirement took effect, according to Penn National.

CEO says focus on total handle can be misleading

In March, Barstool Sportsbook remained in third place in the Pennsylvania market with 12.4% of the state’s online handle, behind FanDuel and DraftKings. In Michigan, it was behind BetMGM as well and in fourth place with 11% of handle.

Snowden said it’s a mistake to obsess over handle as a performance indicator, however, as the site fares much better revenue-wise compared to competitors. Penn National’s partnership with the Barstool Sports media site brings it throngs of young bettors without being compelled to spend as much as competitors on advertising or promotions to acquire them, he said.

The Michigan site, for instance, reported clearing $4 million in revenue in January-March while FanDuel and DraftKings lost money due to promotional spend exceeding what they won from bettors. And that’s without counting the difference between what the companies spend on paid advertising.

Snowden said Penn National is already breaking even overall in costs and revenue for the three existing state sites of Barstool, “when every major competitor is burning through hundreds of millions of dollars.”

He said the majority of the Barstool Sportsbook customers are 21 to 27 years old, which is younger than is the case among competitors, and he’s confident the site is attracting loyalty among them that other operators can’t hope to get from their ubiquitous advertising in traditional TV/radio formats.

Those same type of customers are visiting Barstool-branded retail sportsbooks being rolled out in Penn National casinos and helping boost overall revenue in those properties, which they might never have visited before, Snowden said. Those customers in their 20s carry a great deal of future value, he stressed, even if for now they are probably betting less per wager than older adults. The online Barstool Sportsbooks are attracting a lot of casual, recreational players, which Snowden said is fine.

“You need to take a step back and look at the business model and what it looks like over more than a month or two,” he said. “We’re confident where things are going to shake out. … From our standpoint, the promotional spend is much more about retention. We are laser-focused on retention.”

Online casinos to become bigger, more important

While most of the attention on its online gaming involves sports betting, Snowden noted the company is ramping up its online casino product.

The Barstool Casino in Michigan is just seventh in revenue in the new market there, and Penn National only just launched the product in Pennsylvania this week, nearly eight months after the Barstool Sportsbook began. In both states, Snowden said, the quantity of offerings do not match those of competitors, but the company has plans to address that.

On Monday, the company announced creation of Penn Game Studios, part of an in-house plan to develop unique iCasino content. A key element in furthering that is the pending acquisition of HitPoint Studios Inc., an independent game design company, and its spinoff real money gaming company, LuckyPoint Inc.

Customers of the Barstool online casinos can expect in the future to see new options they wouldn’t find anywhere else, such as tie-ins with the Barstool Sports personalities or through live dealers adopting that brand’s colorful style.

“We launched iCasino in Michigan because we didn’t want to miss out” as other competitors got started, Snowden said, even if market leader BetMGM could offer 315 online games compared to Barstool Casino’s 70.

“I’d be the first to say our iCasino product today is not where it needs to be, a little bit barebones,” he said. “We’re going to get that ramped up by football season.”

He also hinted at other acquisitions Penn National could be making this year aside from HitPoint Studios, including in areas such as technology, media, and affiliate marketing. “We’re actively kicking tires on a lot of things,” Snowden said, not wanting to get too specific but asserting the company would still be “unorthodox” compared to industry counterparts.

Land-based casino picture looking bright

Part of the reason the company can afford to be aggressive is the revenue picture painted for investors from the first quarter of 2021, with even brighter trends emerging since then in April, attributed to gradual lifting of COVID-19 restrictions at its properties and an increasingly vaccinated population that is comfortable with group settings.

While there were some partial pandemic-related closures of properties in the first quarter, on top of capacity and amenity restrictions that remained in place, the company reported $1.27 billion in revenue, within 6% of the first quarter of 2019, and Adjusted EBITDAR performance up 7% from two years ago. The company said its cash balance stood at $2.1 billion at the end of the quarter.

Crucial in all of this, Snowden said, is customers are gradually returning — especially older ones — while patrons are willing to spend above pre-pandemic levels, as has been the case since reopenings in mid-2020. Casinos in the South have led the comeback, with revenue in the first quarter at 103% of 2019 levels.

“Today, we’re still seeing spend-per-visit that is much higher than it was pre-COVID, and visitation is at or near 2019 levels in most of our markets, which is a great combination,” he said. “Importantly, the younger demographic continues to choose gaming as a viable entertainment option while the 55-plus age group has been returning to our casinos as vaccines continue to roll out.”

Included among the positive signs listed by Snowden is a heavy volume of visitors who were not previously part of the Penn National mychoice customer loyalty program and can be converted into that database.

New York: The great big conundrum

In response to a question on the investor call, Snowden called New York State’s situation a “conundrum” when it comes to the future of mobile sports betting there and Penn National’s potential role.

The state, at direction of Gov. Andrew Cuomo, is embarking on a unique plan involving a lot of uncertainty over which online sportsbooks will be able to operate in the state, what type of partnerships they will form with one another, and what the tax rate will be — although it will be clearly be high compared to other states, potentially above 50%.

“It is complicated,” Snowden said. “I think money can be made, but the tax rate obviously is going to be hugely important, and we’re going to have to see how that plays out.”

Penn National is “very active in talking” with other stakeholders about the state’s future direction and the company’s possibilities, he said. Even if conditions might not be ideal in New York for operators, Snowden believes his company’s low relative cost in acquiring loyal sports betting customers puts it in good position if it can enter the market.

“I don’t want the high tax rate and don’t think it benefits the state at all, but if there’s a high tax rate, we think we can still create long-term value and profitability,” the CEO said.

Image by Shutterstock


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